Nifty Information technology (IT) index has been on tear as Dublin based information technology (IT) services and consulting company, Accenture lowered its revenue forecast for fiscal year 2024. The company has been grappling with sluggish demand for its IT and consulting services as high interest rates slam the brakes on an industry that benefited from breakneck growth during the Covid pandemic. The latest results hint at the economic uncertainty in global markets that is affecting consultancies and lead to layoffs or a freeze on hiring. The company now expects full-year revenue growth in the range of 1% to 3%, from its prior forecast of 2% to 5%. Accenture's results and outlook have reaffirmed the market's expectations of cautious near-term demand.
As Accenture sees full-year growth to fall in the range of 1-3%, Infosys ADR and Wipro ADR both fell by 3.8% and 1.8%, respectively. The tech giant previously reduced its revenue forecast in September to 2%, but retained its revenue growth outlook at 2% in local currency terms for the June ended quarter of fiscal year 2024. The news of low guidance has led to a drop in shares of IT giants in domestic market like Infosys, HCL Tech, Wipro, and TCS, which fell between 3-5% each on Friday morning. The impact was felt across all major IT stocks, with the Nifty IT index falling 3%. Analysts expect large IT services companies to start FY2025E with a cautious guidance.
US-rate sensitive IT companies, which have a significant reliance on US markets. Accenture noted that, while the long-term technology spending trends remain intact, client cautiousness due to macro uncertainties is weighing on tech spending in the near term; clients continue to prioritise cost take-out projects as discretionary spends remain weak. Investors' interest in the IT sector will fully revive only after client spending recovers in the US and earnings improve in the March quarter
Tata Consultancy Services and Infosys, two of India's largest IT services firms, also reported downbeat quarterly results earlier this year as spending dries up. However, rate of deal wins by the Indian IT companies has gone higher in recent quarters and that is expected to reflect in their quarterly performance.
